The St Paul Companies has announced that it will stop writing medical malpractice business, just two years after launching it in the UK.
The company is forecasting that medical malpractice will cause a 2001 global underwriting loss of about $940m (£651m). This takes into account a $600m (£415m) increase in reserves.
Following a radical overhaul, the group will also stop writing some reinsurance lines.
Reinsurance operation St Paul Re will no longer write aviation reinsurance, credit reinsurance or financial risk and capital markets and will substantially reduce the US business it underwrites in London.
St Paul at Lloyd's is following the market trend for disappointing underwriting results with an estimated loss of $150m (£96m), excluding losses from the 11 September attacks.
As a result, Lloyd's operations will be downsized. The syndicate will stop writing most of its casualty insurance and reinsurance business, US surplus lines and some non-marine insurance lines.
St Paul chairman and CEO Jay S Fishman said the group's performance had been "exacerbated by recent trends" and the actions were the product of "our careful review of each of the St Paul's business operations".
St Paul intends to trim $50m (£32m) of annual operating expenses globally, with an unspecified number of job cuts.
Moody's Investors Service has downgraded the ratings of St Paul.
The company's senior unsecured debt ratings have been lowered to A2 from A1. The insurance financial strength rating of St Paul Fire and Marine has fallen to Aa3 from Aa2.
Moody's senior credit officer William Wilt said: "Operational problem areas in a minority of the company's business units have overshadowed fundamental improvements and strengths in many of St Paul's business segments."